Not all regulation is bad, says Gateway Funding’s Sandi Sicilia
. The problem with the current regulatory environment is that it lacks clarity and consistency – and too much regulation has led to deserving borrowers being turned away
With more than 30 years in the mortgage business, Sandi Sicilia is one of the industry’s top experts in capital markets and the regulatory environment. But for her, the mortgage business was supposed to be a temporary stop.
“I was going to school for accounting, and I had an accounting job. The company was going out of business, so I needed another accounting job,” she says. “So I got a job in the mortgage business on the accounting side. It wasn’t something I thought I’d stay in for more than a couple of years. I remember coming home and saying to my dad, ‘Hey, I got this job.’ He said, ‘What do you do with that?’ And I said, ‘Oh, I don’t know, something with servicing loans. But you know, this is only a job until I get the accounting job I want.’ So my dad would laugh at me and say, ‘You get that job yet?’ Because here I still am 30 years later.“
And she’s made quite a career. Sicilia, now the chief operating officer for Gateway Funding, played an integral part in growing the company from $350 million to more than $4 billion annually.
Sicilia keeps her fingers on the pulse of the mortgage market. Right now, she sees a secondary market that’s making a comeback, but a regulatory environment that needs clarity and consistency.
Sicilia’s a realist; she doesn’t think the new regulatory environment is a universal negative. But she feels the Consumer Financial Protection Bureau’s throw-everything-at-the-wall approach has resulted in unnecessary difficulties.
“The cost and the time to originate a loan have gone up substantially – that’s the bottom line,” Sicilia says. “I’m not going to say that all regulations are bad, but some of them are too much. There were probably some people who needed the regulations, but it’s gotten a little bit crazy. It’s definitely affected productivity for the number of loans an employee can get through the system. That hurts us, obviously.”
But over-regulation isn’t just a hardship for mortgage pros.
“There are some borrowers it has restricted, quite frankly, just because they want to do a stated-income loan. If it’s the right borrower and the right LTV, they should be able to get them,” she says. “I think there are some regulations that protect the borrower, like the Ability to Repay, to make sure a borrower who really shouldn’t be put in a mortgage isn’t. There’s a little on both sides.”
As onerous as the current regulatory environment can be, Sicilia thinks there’s even more regulation down the road.
“I think there’s still some coming. I don’t think it’s because mortgage bankers aren’t doing anything right, as much as it is that regulators have to show that they’re regulating,” she says.
Which means, of course, that mortgage pros have to be prepared for new regulatory requirements. And even for a large company like Gateway, that can be a full-time job.
“We definitely try to outsource the true compliance part of it, as far as new regulations coming down the pike and the need to be prepared for them,” Sicilia says. “As far as actually implementing them, we have some systems that are automatically getting updates and others where we have to go in and manually update them. We just put some new software in throughout the system that sets up a lot of checks and balances for QM
and other regulatory issues that have come up.
“One thing about new regulations coming out is that some software systems are literally not being updated until the regulation comes out – because we’ve seen in the past where they say they’re going to do it, and then they don’t,” she adds. “So we’ve gone through all of that programming for nothing. So there are some cases, as much as we don’t like it, where it doesn’t go up until the very last minute so we can make sure we’re implementing the right thing.”
And mortgage pros aren’t helped by the fact that many existing regulations are vague to the point of impenetrability.
“A lot of it is interpretation,” Sicilia says. “Your interpretation may differ from how someone from our company interprets it. You just have to do your best. Even within regulators we see that. You might have a state auditor come in who’s auditing something for the CFPB, and you see a difference between regulators. All you can do is hope that you interpreted the rule the best way you can, and if nothing else, you followed your own internal policies and procedures.”
In an ever-changing regulatory environment, Sicilia says, the best you can do is develop solid internal compliance policies and keep your staff as informed as you can about changing guidelines.
“It’s very important, not just from an operations perspective, but from a sales perspective,” she says. “You’ve got to keep salespeople aware of what’s coming down the pike. You’ve got to keep them informed as much as you possibly can, because when they’re out talking to realtors or wherever else they’re getting their business from, the last thing you want is for your loan officers to say, ‘Oh, I didn’t even know that was happening.’ So operationally, it’s important that communication comes down about what the company’s perspective is and how you’re going to implement it.”
SECONDARY MARKET COMEBACK
While the future of the regulatory environment is anyone’s guess, the future of the secondary market is a bit clearer – despite some murkiness about the future of Fannie Mae and Freddie Mac. Some lawmakers seem determined to kill the agencies – which Sicilia thinks would be a mistake.
“I think we still need some type of agency. I don’t think it needs to be two separate agencies like we currently have, but we need something to set the standard,” she says. “I think it shouldn’t be as high a percentage as it has for the last few years. I think if they’re at a reasonable percentage of the business, it’s a good agency to have.”
But for the time being, the secondary market has nicely recovered from the setbacks of the financial crisis, she says.
“There are a lot of new players coming into the market, which has brought more competition. That’s a good thing for us, because we have more outlets for the loans. I think the true secondary market – the securities market – seems to be functioning well. We’ll see what happens with Fannie and Freddie, but for now it’s functioning well. There are a lot of new players, and that’s good for competition.”
This feature is from Mortgage Professional America issue #8.05. Please download the issue to read more.